Working Paper: NBER ID: w25034
Authors: Sandro Ambuehl; B. Douglas Bernheim; Fulya Ersoy; Donna Harris
Abstract: We investigate the impact of peer interaction on the quality of financial decision making in a laboratory experiment. Face-to-face communication with a randomly assigned peer significantly improves the quality of subsequent private decisions even though simple mimicry would have the opposite effect. We present evidence that the mechanism involves general conceptual learning (because the benefits of communication extend to previously unseen tasks), and that the most effective learning relationships are horizontal rather than vertical (because people with weak skills benefit most when their partners also have weak skills). The benefits of demonstrably effective financial education do not propagate to peers.
Keywords: Peer advice; Financial decision making; Laboratory experiment; Communication effects
JEL Codes: D03; D12; D69; G02
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Peer interaction (C92) | Quality of subsequent private financial decisions (D14) |
| Face-to-face communication with a randomly assigned peer (C92) | Quality of subsequent private financial decisions (D14) |
| General conceptual learning (D80) | Quality of subsequent private financial decisions (D14) |
| Communication with treated peer (C92) | Decision making for problems not discussed (D70) |
| Communication improves decision making quality (D80) | Mechanisms requiring peers to understand each other's confusion (C92) |
| Horizontal learning relationships (Y80) | Benefits for individuals with weak skills (J24) |